Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Proofpoint Inc (NASDAQ:PFPT) based on that data.
Proofpoint Inc (NASDAQ:PFPT) was in 27 hedge funds’ portfolios at the end of March. PFPT shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 35 hedge funds in our database with PFPT positions at the end of the previous quarter. Our calculations also showed that PFPT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the fresh hedge fund action regarding Proofpoint Inc (NASDAQ:PFPT).
Hedge fund activity in Proofpoint Inc (NASDAQ:PFPT)
Heading into the second quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PFPT over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Robert G. Moses’s RGM Capital has the most valuable position in Proofpoint Inc (NASDAQ:PFPT), worth close to $81.2 million, amounting to 6.4% of its total 13F portfolio. The second largest stake is held by Polar Capital, led by Brian Ashford-Russell and Tim Woolley, holding a $40.8 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism encompass Brett Barakett’s Tremblant Capital, Anand Parekh’s Alyeska Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to Proofpoint Inc (NASDAQ:PFPT), around 6.38% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, setting aside 3.19 percent of its 13F equity portfolio to PFPT.
Seeing as Proofpoint Inc (NASDAQ:PFPT) has experienced a decline in interest from hedge fund managers, it’s easy to see that there was a specific group of fund managers that slashed their entire stakes last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management said goodbye to the biggest position of all the hedgies watched by Insider Monkey, valued at about $11.2 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $6.8 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 8 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Proofpoint Inc (NASDAQ:PFPT). These stocks are Generac Holdings Inc. (NYSE:GNRC), Bunge Limited (NYSE:BG), Avalara, Inc. (NYSE:AVLR), and MGM Resorts International (NYSE:MGM). This group of stocks’ market valuations are closest to PFPT’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $662 million. That figure was $316 million in PFPT’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Generac Holdings Inc. (NYSE:GNRC) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Proofpoint Inc (NASDAQ:PFPT) is even less popular than GNRC. Hedge funds dodged a bullet by taking a bearish stance towards PFPT. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately PFPT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); PFPT investors were disappointed as the stock returned 13.3% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.